This is Part 1 of 6 in a series on NetSuite Segregation of Duties. We are going to give you an overview of Segregation of Duties and discuss the following:

I suggest you watch the video. It’s easier to understand if you are a visual/audio learner. The content below is the same as the video. It’s for those who learn by reading.

 

Part 1 Overview – NetSuite Segregation of Duties

 

Definition of Segregation of Duties

Segregation of Duties is the concept of separating incompatible duties, so that one person doesn’t have all duties.

The 3 areas that we’re trying to separate is:

  1. authorization, which means approving of transactions;
  2. safekeeping, which means holding the assets or access to the asset, and
  3. record keeping, keeping track of the asset or liability. What we want to do is have 2 to 3 people required to complete a process.

Definition of Segregation of Duties

Fig.1 – Segregation of Duties Definition

 

Three Sides of Fraud Triangle

In internal controls, we are concerned about errors and fraud. Fraud generally happens when 3 conditions are present and help make it possible. To achieve fraud, there has to be a motive, rationalization, and opportunity. We’ll explain further.

three sides fraud

Fig.2 – The Three Sides of Fraud

 

Motive

Motive is when someone needs money or has extreme pressure or even the perception that they need money. That’s their motivation to commit fraud. Oftentimes, we will see grandmothers, who are really honest, and their families are in trouble whether it’s medical bills or something is happening within their family that causes them to have  this motivation. It could also just be the perceived money to buy certain things or live a particular lifestyle. That’s usually the first indicators of fraud – people living way above of their means.

Three Sides of Fraud Motive

Fig.3 – Motive

 

Rationalization

The second part of the fraud triangle is the rationalization. The person rationalizes his or her actions. “It’s okay, it’s acceptable.” A lot of times, it starts out with the “The Company has a lot of money, anyways” or “I don’t get paid enough for this job, so I might as well just take this money.” Another way that starts is “This is only temporary. I’ll make it up or I’ll repay them.” So, it starts small.

Three Sides of Fraud Rationalization

Fig.5 – Rationalization

 

Opportunity

The third side of the fraud triangle is opportunity. That’s when processes, systems, or circumstances allow the person to commit fraud without someone else noticing, detecting, stopping, or preventing them. In our case, we’re going to focus on the opportunity particularly around systems, which is NetSuite because that’s the part that we can best control.

Three Sides of Fraud Opportunity

Fig.6 – Opportunity

Within NetSuite, there could be lots of conflicts. Because of our limited time together,  I will focus on several that I thought would be most helpful to companies.

 

Segregate Permissions in NetSuite

Segregate Permissions

Fig.7 – Segregate Permissions in NetSuite

We focused on 3 particular areas:

  1. creating vendors and paying bills to vendors is a high risk,
  2. creating customers and issuing credit memos to those customers, and
  3. creating journal entries and approving those entries.

 

To recap, we have discussed the overview of;

 

In future sessions, we’ll go into more details about NetSuite permissions.

Thank you so much, and we will talk to you soon.

 

watch video in youtube

 

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